Hospital Accused of Overpaying Physicians Reaches Settlement

Covenant Medical Center in Waterloo, Iowa will pay a $4.5 million settlement to the federal government to settle a dispute regarding physician pay.

According to critics who have been following the hospital’s pay schedule, Covenant has been overpaying physicians for their services. Critics have accused the hospital of offering high pay to doctors who bring patients to the hospital for medical services.

Under the federal Stark Act, hospitals are not allowed to financially reward employed doctors for bringing in patients. The act is intended to protect patients from receiving and paying for unnecessary health care.

Covenant Medical Center denied the allegations that it has committed any illegal action. According to a press release, the hospital agreed to settle in order to avoid the long litigation process and high costs that a legal battle would bring.

The hospital continues to defend its position that its doctor pay is consistent with fair market values. Records show that Covenant paid some of its doctors more than $2 million a year.

Other Iowa doctors typically make half that amount or less, say critics. The unusually high pay at Covenant was first reported by individuals at Cedar Valley Medical Specialists, an Iowa medical practice. Even medical specialists at the prestigious Mayo Clinic were making less than one third of the amount paid to some Covenant physicians.

The $4.5 million payment is the second largest settlement for health care fraud ever made in Iowa. The largest settlement occurred in 2007 in a case of Medicare fraud and resulted in a payment of $5.7 million.